SEC Reportedly Approves Short Selling in the Philippine Stock Exchange | BitPinas

The Securities and Exchange Commission (SEC) has approved the introduction of short-selling on the Philippine Stock Exchange (PSE)​.

This development occurs as the PSE and SEC are finalizing the details of the implementation. They plan to initiate this within the current year, according to SEC chairperson Emilio Aquino in an interview with The Philippine Star.

Key Highlights

• The SEC has approved the PSE’s plan to introduce short-selling in the market to provide more liquidity.
• The precise details of the implementation are being discussed between the PSE and SEC.
• The introduction of short-selling is expected to encourage big funds to return to the market, an important step towards attracting foreign investors back to the Philippine market.

What is Short Selling?

Short-selling is a trading strategy where investors borrow shares to sell at the current price with the intention of buying them back later when the price drops. The difference between the selling price and the repurchase price is the profit for the investor.

On May 24, 2023, PSE chief executive Ramon Monzon was reported by the Financial Times to be advocating for the launch of short selling in the Philippines. The objective of attracting foreign investments back into the market, which would increase liquidity and bring the PSE’s product offerings in line with other stock exchanges in Southeast Asia.

However, short selling, the introduction of which to the local stock market has been discussed since the 1990s, has met lukewarm reception from local regulators. Concerns were raised about potential extreme price fluctuations similar to the GameStop incident.

What is the GameStop Incident?

The GameStop incident, also known as the GameStop short squeeze, occurred in early 2021 and was a notable event in the history of the stock market.

GameStop, a struggling video game retailer in the U.S., saw its share price skyrocket due to a large number of individual investors buying the stock, many of whom were members of a Reddit forum called r/WallStreetBets. This surge in buying caused a “short squeeze”, forcing those who had bet against the stock (shorted it) to buy shares to cover their positions, further driving up the price.

The event led to significant financial losses for some large hedge funds that had heavily shorted GameStop, expecting its price to fall. The incident stirred a global conversation about market dynamics, the role of retail investors, and the potential need for regulatory reform.

Monzon said he has been working to address these concerns and explain the potential benefits of increased foreign investment for the PSE’s liquidity and modernization.

Last March, GCash unveiled GStocks, which allows users to trade local stocks directly on the GCash App. This, along with GCrypto, was announced at the company’s FutureCast Summit.

In 2021, Monzon said they are considering to add crypto trading on the Philippine Stock Exchange. “It’s an asset class we cannot ignore anymore,” he said at that time.

This is a developing story.

This article is published on BitPinas: SEC Reportedly Approves Short Selling in the Philippine Stock Exchange

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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• Source: https://bitpinas.com/fintech/sec-pse-short-selling-approve-report/